October 2007

Success is a crystal clear wrap

Dear Editor,

Following on from the views in the last issue on the impact of inflation on retirement savings. It may sound a little simplistic, yet in my view the two most important factors in beating inflation are to maximise investment return via asset allocation and performance monitoring while at the same time minimising costs. This approach sounds straightforward enough. However, truly understanding the costs of a pension is hugely complex in a world of bundled pricing models, allocation rates, hidden commissions and complex transaction structures. However, the recent emergence of cleanly priced wraps has brought clarity to an otherwise hazy retirement savings market.

A cleanly priced wrap service can dramatically reduce the cost of funds as all the kickbacks or 'rebates' from fund managers are given back to the end client. Most of the time (for James Hay anyway) this will equate to 50% of the annual fund charge. The key challenge to advisers is to have a two pronged attack - the first is to implement, continuously monitor and assess asset allocation and investment performance but also to choose the right provider to do it with.

Chris Smeaton
Propositions and E-Commerce Manager
James Hay